Deck 15: Special Forms of Contracts

Question 1

Both a note and a draft may be payable at a designated future time or on demand.

Answer 1

True

Question 2

Which of the following correctly describes a certificate of deposit?

A)It is a draft that is payable by a bank.
B)It is not considered to be a negotiable instrument.
C)It is a note that is payable on demand.
D)It is a note where the maker is a bank.
E)It is a money order where the maker is a bank.

Answer 2

D

Question 3

Karen has a checking account at First Bank.Karen writes a check to Bonanza Apartments for her rent.In this situation:

A)Karen is the drawer,First Bank is the drawee,Bonanza is the payee.
B)Karen is the drawee,First Bank is the drawer,Bonanza is the payee.
C)Karen is the payee,First Bank is the drawee,Bonanza is the drawer.
D)Karen is the payee,First Bank is the drawer,Bonanza is the drawee.
E)Karen is the maker,First Bank is the drawee,Bonanza is the payee.

Answer 3

A

Question 4

A promissory note for the purchase of an automobile qualifies as a negotiable instrument.

Question 5

Generally,in agency situations,the principal and agent must both have contractual capacity.

Question 6

Sandy signs a negotiable instrument that orders Sally to pay $1,000 to the order of Pat on May 4,2001.What type of instrument is this?

A)Promissory note.
B)Time draft.
C)Check.
D)Sight draft.
E)Money order.

Question 7

The law of negotiable instruments was designed to create a substitute for cash and to facilitate commerce.Has the importance of negotiable instruments in commerce increased or decreased in recent years? How will increased online commerce affect the importance of negotiable instruments?

Question 8

Which of the following best describes a negotiable promissory note?

A)Any promise to pay a fixed amount of money.
B)An unconditional promise to pay a sum of money.
C)A promise to pay a sum of money upon the happening of an event outside the control of the promisor.
D)An order to a third party to make a payment in order to discharge an obligation of the promisor.
E)Both B and C are true.

Question 9

An attorney is an agent when he represents a client.

Question 10

A check is a form of draft that is drawn on a bank.

Question 11

Which of the following is true about drafts?

A)Drafts are two-party paper.
B)A draft must have a bank as the drawee.
C)A draft contains an order to pay.
D)All drafts are payable on demand.

Question 12

A sight draft that arises when credit is extended with the sale of the goods is known as:

A)A time draft.
B)A trade acceptance.
C)A check.
D)A time note.
E)A demand note.

Question 13

An agency relationship is created by the mutual consent of a principal and an agent.

Question 14

When does the drawee become liable for payment of a draft?

A)When the drawer signs it.
B)Automatically upon its creation.
C)Upon accepting it.
D)Upon the performance of the underlying obligation.

Question 15

Agency is a fiduciary relationship.

Question 16

A principal who lacks contractual capacity can appoint an agent.

Question 17

A drawee is not liable on a draft until the drawee has accepted it.

Question 18

Both a sight draft and a time draft are payable on demand.

Question 19

A corporation must conduct all of its business affairs through agents.

Question 20

Agency relationships are not necessary to the operation of a partnership.

Question 21

An agency arrangement can be terminated by:

A)Achievement of the agency's purpose.
B)Mutual agreement.
C)Occurrence of a specified event.
D)Both A and B.
E)A,B,and C.

Question 22

Agent enters into a contract with Third Party on behalf of Principal.Agent told Third Party that this contract was being entered into on behalf of someone else,but did not identify Principal to Third Party.A couple of weeks later,Principal disappears and Third Party wants to hold Agent to the contract.Third Party can:

A)Not recover from Agent because Agent had disclosed the existence of Principal.
B)Not recover from Agent because Third Party must first try to recover from Principal.
C)Recover from Agent because Agent had a duty to ensure that Principal performed on the contract.
D)Recover from Agent because Agent did not disclose the identity of Principal.
E)Recover from Agent because Agent acted on behalf of an undisclosed principal.

Question 23

In an undisclosed agency,both the principal and the agent are liable on the contract with the third party.

Question 24

Someone authorized to act on behalf of another is generally known as a(n):

A)Agent.
B)Independent contractor.
C)Employee.
D)Surety.

Question 25

An undisclosed agency exists where the third party is aware that the party he is dealing with is an agent,but does not know the identity of the principal.

Question 26

An agency always requires:

A)Both an agent and principal who are adults.
B)A written contract.
C)Consideration on the part of both the principal and the agent.
D)An identified underlying transaction.
E)Intent by both the principal and agent to be in the arrangement.

Question 27

An agency agreement may exist for an infinite period of time.

Question 28

The bankruptcy of which party(ies)will cause an agency to terminate?

A)The principal only.
B)The agent only.
C)Either the principal or the agent.
D)Neither the principal nor the agent.

Question 29

An agent may continue to represent the principal even after the agency relationship is terminated.

Question 30

The death of which party(ies)will cause an agency to terminate?

A)The principal only.
B)The agent only.
C)Either the principal or the agent.
D)Neither the principal nor the agent.

Question 31

An agency agreement may terminate after a certain event happens.

Question 32

In an undisclosed agency,both the principal and the agent are liable on the contract with the third party.

Question 33

A person who is not an employee who is employed by a principal to perform a certain task on his behalf is an independent contractor.

Question 34

When a principal hires another to kill someone,an agency is created.

Question 35

Pedro hires Andrea to negotiate the purchase of a sailboat for Pedro.Andrea decides to buy from Sally a sailboat meeting Pedro's specifications.Andrea tells Sally that the purchase is really being made by Pedro,and Andrea and Sally sign a written contract,with Andrea signing on Pedro's behalf.Based on all this:

A)Pedro is not liable on this contract,but Andrea is liable.
B)Neither Andrea nor Pedro can be held liable on this contract.
C)Andrea is not liable on this contract.but Pedro is liable.
D)Either Andrea or Pedro could be held liable on this contract.

Question 36

An agent generally is not liable on contracts made in connection with a fully disclosed agency.

Question 37

An agent can be held liable on any contract negotiated by the agent on behalf of the principal.

Question 38

Which of the following is true?

A)All employees are agents,and no independent contractors are agents.
B)All employees are agents,and some independent contractors are agents.
C)Some employees are agents,and some independent contractors are agents.
D)Some employees are agents,and no independent contractors are agents.
E)No employees are agents,and no independent contractors are agents.

Question 39

The primary function of an agent in a principal-agent relationship is to:

A)Protect the principal from legal liability.
B)Conduct business on behalf of the principal.
C)Enter into contracts with the principal.
D)Operate as a partner with the principal.
E)Maintain the principal's status quo.

Question 40

John has been hired by Bubbaweiser Beer Company to purchase an airplane.He approaches Sam who has a Cessna for sale.John does not mention that he is making this purchase on behalf of someone else.He negotiates a deal.Two weeks later,Sam learns that John did not negotiate the deal for himself,but was acting as an agent.Bubbaweiser declares bankruptcy and cannot buy the plane.John:

A)Can be held liable on the contract because this was an undisclosed agency.
B)Can be held liable on the contract because this was a partially disclosed agency.
C)Can be held liable on the contract simply because he is an agent.
D)Cannot be held liable on the contract.
E)Can be held liable on the contract unless he was on a frolic and detour.

Question 41

Employers and unions are required to negotiate in good faith.

Question 42

Generally,if an agent negligently injures a third party within the scope of the agency,the principal can be held liable even if the agent was violating the instructions of the principal.Is this fair to the principal? What is the justification for this rule?

Question 43

The two labor organizations that combined in 1955 were:

A)The Teamsters and the United Auto Workers.
B)The United Auto Workers and The American Federation of Labor.
C)The American Federation of Labor and the Congress of Industrial Organizations.
D)The United Steel Workers and United Auto Workers.
E)The United Steel Workers and the Congress of Industrial Organizations.

Question 44

Today,approximately 72 percent of private sector wage and salary workers belong to unions.

Question 45

Which of the following is true about the American Federation of Labor?

A)It was formed in the early part of the twentieth century.
B)When formed,only skilled craft workers were allowed to join.
C)All members of other unions are automatically members of it.
D)It is not allowed to engage in political lobbying.

Question 46

Charlie Customer goes to Kim,a local travel agent,and buys an airline ticket on BartAir.In this transaction:

A)Charlie is the principal,Kim is his agent.
B)BartAir is the principal,Kim is its agent.
C)Kim is the agent of neither BartAir nor Charlie.
D)Kim is the agent of both Charlie and BartAir.

Question 47

Prior to the Industrial Revolution,employees and employers had similar bargaining power.

Question 48

Mary has been hired to write courses for a Web-based training organization.Mary works at the offices of the organization.Mary is given content guidelines and a contract for each course that she writes,and is paid a flat fee upon completion of the course.It can take anywhere from 2 weeks to 6 weeks to complete a course.The organization wants the contractors to work in their offices during the regular 40-hour work week,unless they need to be elsewhere to do research.The organization provides a computer to Mary.Mary also is able to use other employees at the organization for word processing and editing.Is Mary an employee or an independent contractor?

Question 49

Why can apparent agency be created only by representations of the principal,but not the supposed agent?

Question 50

In collective bargaining,wages and hours are considered which type of subjects?

A)Compulsory.
B)Optional.
C)Permissive.
D)Linked.

Question 51

Agnes is an agent for Pepe for maintaining Pepe's antique car collection,including the sale and purchase of antique cars.Agnes has had this position for several years,but recently Agnes has developed a cocaine habit.She recently sold one of Pepe's cars and kept some of the money herself to buy some cocaine.Soon thereafter,Agnes was declared bankrupt.The state then notified Agnes that she had sold the maximum allowable number of cars in a year without getting a dealer's license.Shortly thereafter,Pepe was on a secluded island and died,which no one knew about until 2 weeks later.Discuss the effect of these events on the existence of the agency.

Question 52

The Landrum-Griffin Act was passed in response to abuses by management in opposing unions' organizing activities.

Question 53

The Labor-Management Reporting and Disclosure Act establishes the rights of the employer.

Question 54

The approximate percentage of private sector wage and salary workers who belong to a union today is:

A)7.
B)15.
C)26.
D)34.
E)52.

Question 55

The Labor-Management Relations Act gives the President the right to seek an injunction to stop a strike that would create a national emergency.

Question 56

What practical problems are there with the notice requirements of the Plant Closing Act?

Question 57

Which of the following would not terminate an agency by operation of law?

A)A real estate agent loses his license.
B)A principal hires another agent with similar duties.
C)The principal is declared bankrupt.
D)A lightning bolt kills the principal.

Question 58

Decisions of the National Labor Relations Board are enforceable in court.

Question 59

Some subjects,such as wages and hours,are compulsory subjects of collective bargaining.

Question 60

Principal has entered into a 6-month contract during which Agent will sell Principal's products on a commission basis.Although Agent is complying with all terms of the agreement,during the third month Principal tells Agent she is no longer going to sell his products and will receive no further commissions if she does.Which of the following is true?

A)Agent continues to have a duty to sell because the 6 months are not yet over.
B)Principal has the power,but not the right,to terminate the agency.
C)Principal has the right,but not the power,to terminate the agency.
D)Principal has both the right and the power to terminate the agency.
E)Principal has neither the right nor the power to terminate the agency.

Question 61

The Overrock Typewriter Company has been in business for a hundred years,but falling sales have forced several layoffs in the past 20 years.There has never been a union at the company,but some workers have organized a union election.Overrock's owner will not discuss wages if a union is formed,and might close the plant.Discuss the legal implications.